Financing clean-development investments in developing regions can offset the net transfer of carbon emissions from these countries to developed ones and strengthen domestic climate policy in developed nations. These findings, reported this week in Nature Climate Change, shed light on how to integrate responsibility for trade-induced emissions into national policies, an issue largely discussed but still unresolved worldwide.

Carbon emissions embodied in international trade have increased fourfold in the past two decades, from 0.4 GtCO2 in 1990 to 1.6 GtCO2 in 2008. Although it is recognized that continuing to neglect this will undermine the ability of national emissions-reduction targets to decrease global emissions, domestic policies are still based on territorial emissions only. This is mainly because it is not clear how to best incorporate emissions transfers into policy. Policy makers also fear that the economic cost associated with such integration could be significant.

Marco Springmann uses a global energy-economic model to provide the first consistent analysis of the environmental and economic effects of three different policy approaches to account for emissions transfers in policy: adjusting domestic emissions-reduction targets to take emissions transfers into account, offsetting transfers by financing emissions reductions in emissions-exporting developing regions and adjusting the import and export prices of goods in proportion to their carbon content. The author finds that both the first and third options are environmentally ineffective. However, the second approach yields the largest net economic benefit of emissions reduction and decreases global emissions in the most cost-effective way.